Taylor Wimpey leaseholders freed from doubling ground rent clauses – what it means for you
Homeowners with Taylor Wimpey leases still managed by the firm will have costly clauses that see their ground rent double every 10 years removed following action from the competition watchdog. Affected leaseholders’ ground rents will now remain at the amount charged when they first bought their home. Doubling ground rent clauses will also be left out of any future Taylor Wimpey leases.
Update: 18 March 2022: The Competition and Markets Authority (CMA) has confirmed it is investigating two management firms - Adriatic Land 3 and Brigante Properties - to try to get them to remove terms, which mean ground rents double in price every 10 to 15 years, from freeholds purchased from housing developer Taylor Wimpey.
The CMA has also issued an update on its investigation into Countryside after 15 businesses that bought freeholds from the housing developer have now agreed to remove the same terms as above from its leases. See our MSE news story for more.
No ground rents where Taylor Wimpey is still the freeholder have actually doubled since it set-up these leases, so no refunds need to be made - though homeowners may have struggled to sell their home or remortgage due to these clauses.
The removal of doubling ground rent clauses doesn't, however, automatically apply to people with leases that were sold on by Taylor Wimpey to a new freeholder. In this instance, leaseholders need to contact their freeholder to ask if it will make the same changes as Taylor Wimpey, and to see if it will refund any doubled ground rents that may have already been charged.
Taylor Wimpey says it will proactively contact freeholders who own leaseholds that contain such clauses but it is up to the freeholder to decide what action, if any, it will take. For more information on this, see Taylor Wimpey's website. The Competition and Markets Authority (CMA) couldn't say how many leases had been sold on by Taylor Wimpey to third party freeholders.
The CMA first opened an investigation into several property firms, including Taylor Wimpey, in September 2020 after uncovering “troubling evidence” of potentially unfair terms and mis-selling. The CMA then wrote to Taylor Wimpey in March this year asking it to ban the use of doubling ground rent terms.
Around 4.5 million people in England currently own their home on a leasehold basis - typically flat owners and some new-build property owners. This means while you own the property, you don't own the land it sits on. The land is instead owned by a freeholder, which can be an individual or a management company, and you typically have to pay rent to them on an annual basis (known as 'ground rent') for a set number of years. See our What is a leasehold? guide for more info on how they work.
Countryside agreed to remove similar clauses in September, but other leasehold investigations are still ongoing
At the same time the CMA opened an investigation into Taylor Wimpey, it also asked Countryside to remove its similar unfair ground rent charges. In September, the firm agreed to remove clauses from its leases that allow it to double ground rent every 10 to 15 years and to remove terms that were originally doubling clauses but were converted so that the ground rent increased in line with the Retail Prices Index (RPI) measure of inflation.
The CMA's investigations into Barratt Developments and Persimmon Homes are both still ongoing.
You can extend your lease to try to avoid rising ground rents
One way to try to get around increasing ground rent clauses is to take out what is known as a ‘statutory’ lease extension - which you can do if you have owned your property for at least two years. This extends the lease but also reduces the ground rent down to zero, which is sometimes referred to as a 'peppercorn' lease.
To do this though, you will have to pay the freeholder a premium, and you'll also have to pay for the legal costs of extending the lease. How much this premium is will depend on several factors, including the cost of the property, so ensure you know the costs involved first.
What officials say
Andrea Coscelli, chief executive of the CMA, said: “This is a huge step forward for leaseholders with Taylor Wimpey, who will no longer be subject to doubling ground rents. These are totally unwarranted obligations that lead to people being trapped in their homes, struggling to sell or obtain a mortgage. I hope the news they will no longer be bound into these terms will bring them some cheer as we head into Christmas.”
Michael Gove, secretary of state for levelling up, added: “Unfair practices, such as doubling ground rents, have no place in our housing market - which is why we asked the CMA to investigate and I welcome its success in holding these major industry players to account.
"This settlement will help to free thousands more leaseholders from unreasonable ground rent increases and other developers with similar arrangements in place should beware, we are coming after you.”
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